Strategic alliance contracts: dimensions and determinants of contractual complexity

• Published in: Strategic management journal Vol. 28; no. 3; pp. 313 - 330
• Main Authors: Reuer, Jeffrey J., Ariño, Africa
• Format: Journal Article
• Language: English
• Published: Chichester, UK John Wiley & Sons, Ltd 01-03-2007; John Wiley and Sons; Wiley Periodicals Inc
• Subjects: Alliances; Business orders; Business strategies; Business structures; Collaboration; Contract provisions; Contracts; Corporate governance; Corporate strategies; Economic models; Factor analysis; International alliances; Investment; Opportunistic behavior; organizational governance; strategic alliances; Strategic management; Studies; transaction cost economics; Trust
• ISSN: 0143-2095; 1097-0266
• DOI: 10.1002/smj.581

In contrast to prior studies examining strategic alliances as discrete governance structures (e.g., alliances vs. M&A, equity vs. non-equity agreements), we investigate their particular contractual features. The analysis examines the dimensionality of the contractual complexity construct and investigates the determinants of firms' adoption of various contractual provisions. We find two underlying dimensions of contractual complexity, based upon the enforcement and coordination functions of different contractual provisions. The evidence reveals that firms' usage of particular contractual provisions is a function of asset specificity as well as whether the alliance's duration is pre-specified or open-ended. The findings also speak to the debate surrounding the roles of prior ties and trust for alliance governance. Firms that have collaborated with each other in the past are not less likely to negotiate enforcement provisions; rather, repeat collaborators are less likely to adopt contractual provisions that are informational in nature and are geared to the coordination of the alliance.